[krishnakarthik1]

Firstly, LIC is not technically an investment and if one were to consider it as one, not that good of an investment. The returns are really low. As the name suggests its real value comes when the person with the policy 'kicks the bucket'.

Listing is really good for the company. It will make it more transparent and accountable. And sovereign guarantee will not be that big an issue, if it were there would be no business for private insurers.

Originally Posted by GTO

What do BHPians think of investing in the stock, assuming the offer price is reasonable?

I will trade it initially for sure but not invest. Get stock allotted and try to exit at the peak of the hype, 10% or 15% maybe. I did the same with IRCTC.

It's clearly 'buy the rumor, sell the news' stock in my view because I am not sure there is total transparency about what LIC does with the money. And once those reports start coming out I am not sure if the picture would be that rosy.

[Sree]

First the government forced LIC to bail out all the inefficient government companies by using it to buy all the shares, so that the sham disinvestment process can be claimed to be successful.

Now, it wants to transfer those risks and losses onto unsuspecting public.

I think I will stay away.

[longhorn]

Originally Posted by Stribog

Till the reforms of 91, let's not forget the state ran everything and we all know the results of that. If Mr Rao wasn't forced to sell the "family silver", god knows that we would be another Zimbabwe or Venezuela now.

Just to set the record straight, the "family silver" was sold not by Mr. Rao, but by his predecessor Mr. Chandrasekhar and his partner in crime, Mr. Y Sinha. If anything, Mr. Rao along with MMS were the ones who took the bull by its horns and steered the country out of an economic disaster. They were true nationalists who laid the foundation stones for much of the nation's progress in the last two decades, unlike the fake nationalists we see today who take no responsibility for their actions.

https://www.business-standard.com/ar...0200041_1.html

The bigger question is, why would any government want to get rid of their navaratna institutions. Why kill the goose that lays the golden egg? I can understand the government selling off that black hole called Air India, but why divest LIC from whom they earn roughly 2400 crores annually?

[Hells Bells]

Originally Posted by GTO

What do BHPians think of investing in the stock, assuming the offer price is reasonable? I always & only invest in companies with a strong standing & fundamentals.

Thanks in advance .

AMC companies like LIC are cash flow rich company and being in service industry implies their ROCE would be high (very little capital required for greater increase in revenues). However, this logic holds well if the org is well managed. Equivalents like Nippon AMC or HDFC AMC deliver on better governance while retaining the benefits of cash flows. LIC being the white knight it has become in recent times would very likely show up with worse fundamental indicators once its bad investments are under public scrutiny.

LIC is a double edged sword based on what govt chooses to do on governance due to the public scrutiny that would come in with IPO.

[Lalvaz]

Originally Posted by Stribog

Out of sheer curiosity, do you only travel by Air India, use BSNL mobile telephony and broadband, stay only in Ashoka hotels and use only Ration / PDS groceries? Or do you actually consume private sector products?

Till the reforms of 91, let's not forget the state ran everything and we all know the results of that. If Mr Rao wasn't forced to sell the "family silver", god knows that we would be another Zimbabwe or Venezuela now.

There's much to refute in your post, but let me restrict it only to your premise that the state run enterprises are inefficient.

IIT's, IIM's, REC's, VJTI, UDCT are state run. DD is state run. IOC, BPCL, HPCL are state run. AIIMS is state run. SBI, UTI, LIC, ONGC are state run. The list is endless.

Many of these state run enterprises were mismanaged or their crown jewels were sold to benefit the private sector, which then fell under the weight of their own mismanagement or siphoned off funds. See examples of Jet Airways and KF amongst others.

Having said that, there is merit in selling stakes in PSU's, especially in relatively transparent IPO's, but there is plenty wrong in wanting to sell stakes in PSU's to outside investors, and continuing to use the majority control to bail out the govt.

If the same thing was done by a listed pvt sector company, SEBI and the capital market participants would be up in arms that the majority shareholder is shafting the minority shareholders. Here, I see that being openly advocated. Shows how shallow the understanding of corporate governance.

[sunnsood]

LIC is Government of India's IPO & OFS savior. its last major investment was in saving IDBI bank. Add to that Gross NPA over 6%

LIC's gross NPAs rose to 6.10 per cent in the first six months (April-September) of 2019-20. Gross NPAs have almost double in the last five years. The insurer always maintained a stable 1.5-2 per cent gross NPAs.

IPO may be for initial 8-10%. If Government doesn't change the mandatory 26% public holding within 3 years, expect more stake sale. This means 2 to 3 additional share sale via OFS at discounted rates.

I also don't see any major change in management or its style of management. So I have a negative outlook on the company and I won't apply of it IPO or ever buy its share. It's another Coal India in the making.

[Stribog]

Originally Posted by longhorn

Just to set the record straight, the "family silver" was sold not by Mr. Rao, but by his predecessor Mr. Chandrasekhar and his partner in crime, Mr. Y Sinha. If anything, Mr. Rao along with MMS were the ones who took the bull by its horns and steered the country out of an economic disaster. They were true nationalists who laid the foundation stones for much of the nation's progress in the last two decades, unlike the fake nationalists we see today who take no responsibility for their actions.

https://www.business-standard.com/ar...0200041_1.html

The bigger question is, why would any government want to get rid of their navaratna institutions. Why kill the goose that lays the golden egg? I can understand the government selling off that black hole called Air India, but why divest LIC from whom they earn roughly 2400 crores annually?

Chandrasekhar succeeded Rao, and it was Rao who started disinvestment in India in any serious capacity. 91-92 alone saw 3,000 crores raised in equity sales like this one.

If you are arguing that the 91 reforms were it and there have been no further, well you are so off base and driven by your political agenda that I see no point in even begining to refute it.

On topic though, a stake sale is NOT the same as privatisation. If you would know the difference you would realise that the govt by selling a 10-20% stake will still retain a substantial controlling interest.

Originally Posted by Lalvaz

There's much to refute in your post, but let me restrict it only to your premise that the state run enterprises are inefficient.

IIT's, IIM's, REC's, VJTI, UDCT are state run. DD is state run. IOC, BPCL, HPCL are state run. AIIMS is state run. SBI, UTI, LIC, ONGC are state run. The list is endless.

Many of these state run enterprises were mismanaged or their crown jewels were sold to benefit the private sector, which then fell under the weight of their own mismanagement or siphoned off funds. See examples of Jet Airways and KF amongst others.

Having said that, there is merit in selling stakes in PSU's, especially in relatively transparent IPO's, but there is plenty wrong in wanting to sell stakes in PSU's to outside investors, and continuing to use the majority control to bail out the govt.

If the same thing was done by a listed pvt sector company, SEBI and the capital market participants would be up in arms that the majority shareholder is shafting the minority shareholders. Here, I see that being openly advocated. Shows how shallow the understanding of corporate governance.

How many of those educational institutions are anywhere in the global rankings?

In QS rankings IIT Bom is 172! IIM A is #60. How many patents are filed by these institutions? How many scientific advances, measurable do they make?

Your definition of "world class" seems nebulous. Yes they are super hard to get in but that's a function of competition, but by yardsticks they are measured in globally for unis, none of these figure anywhere in the top 25. And let's not say these are west skewed, look at the sheer number of unis from China for instance.

Moving on, you do realise, if not for the total of some 45,000 crore in bail out money paid into AI from 2012, it would have died a long time ago?

If KF or Jet were given a fraction of this munificence, they would be a top 10 global airline. By every verifiable yardstick,

As recently as 2015 it's employee to aircraft ratio was a miserable 300 (global averages around 120), it is only s nce then it has been reduced to a professional 110. But for decades it carried almost 180/aircraft more.
It is one of the worst in terms of on time figures, has a higher proportion of baggage misplaced... The airline is a mess kept afloat only by taxpayer money.

Till 91 and privatisation, we used to wait 1-5 years for a telephone connection, chetak scooters (though private company, ran on quotas) had a waitlist running into years. Please let's not talk about how glorious our PSU are.

Yes a few are the exceptions but that's not the norm.

Sick PSU's contributed to 1,20,000 crores in loses just last year, and this increases every year. Just in 2019 Air India + BSNL and MTNL haemorrhaged a whopping 90,000 crores in tax payer money. To put things into perspective that's 30,000 crores more than our entire MNREGA budget.

So please let's not go down this "PSU good" path. More money has been spent keeping these white elephants alive than in keeping private sector companies afloat and I haven't even touched the monumental mismanagement of banking PSU's

On the "good PSU's", a stake sale where the govt retains a controlling interest to raise money is not a wrong thing at all.

I fail to see why you and the forum in this thread think it's tantamount to privatisation when it's a limited stake dilution.

[rubicon]

from the tweets of Subramanian Swamy - Rajya Sabha MP, Fmr. Union Cabinet Minister, Harvard Ph.D in Economics; Professor, BJP National Exec. member.

[v1p3r]

Originally Posted by Stribog

Chandrasekhar succeeded Rao

This is factually incorrect.

Originally Posted by Stribog

... if not for the total of some 45,000 crore in bail out money paid into AI from 2012, it would have died a long time ago?

If KF or Jet were given a fraction of this munificence, they would be a top 10 global airline. By every verifiable yardstick,

As recently as 2015 it's employee to aircraft ratio was a miserable 300 (global averages around 120), it is only s nce then it has been reduced to a professional 110. But for decades it carried almost 180/aircraft more.
It is one of the worst in terms of on time figures, has a higher proportion of baggage misplaced... The airline is a mess kept afloat only by taxpayer money.

This only tells half the story. In the first half of the 2000s, AI was profitable and the outlook was very rosy. Certain airline owners and their friends, who just happened to be decision makers in the relevant ministries, decided to merge AI (a great airline) with IC (wretched). They further saddled the new combined entity - first called Indian locally and AI internationally, and now just AI - with a needlessly massive aircraft order for 70,000 crores, which in those days was $ 15.5 bn. Then they withdrew certain very profitable routes - from memory LHR, DXB, SIN - guaranteed by bilateral treaties, which instantly went to those new airlines and their rich (and fraudulent) promoters. Inexplicably, bilateral quotas were also renegotiated, giving ME3 better rights, loads, and connectivity to India while leaving AI with nothing new. AI's present woes are a reflection of this deliberate assassination attempt.

I will admit to having a soft spot for AI, having flown multiple times and being treated very well even in Y. Their senior staff continue to ooze class. IC, on the other hand, was largely unloved and deserved to be shut down. I am sure members like V.Narayan who are well-versed in Indian aviation lore will be able to shed even more light.

I agree with the bemusement at members equating a minority stake sale with privatisation.

[Stribog]

Originally Posted by v1p3r

This is factually incorrect.




I will admit to having a soft spot for AI, having flown multiple times and being treated very well even in Y. Their senior staff continue to ooze class. IC, on the other hand, was largely unloved and deserved to be shut down. I am sure members like V.Narayan who are well-versed in Indian aviation lore will be able to shed even more light.

I agree with the bemusement at members equating a minority stake sale with privatisation.

True, I got Chandrashekhar confused with Deve Gowda for some reason. My bad

That being said, Chandrashekhar did come up with a plan to disinvest (if he had used privatisation, the left parties would have killed the proposal then and there), but even before it could be implemented, Cong pulled the plug on this govt and it was Rao who went ahead and raised the first tranche of 3.5k crores.


On AI, I personally have had horrible on board experiences, though I always prefer their direct flight into Melbourne from Delhi, no layovers in KL or Spore, just a direct 14 hour flight but that's the only plus. Even in business class their crew act like they are doing you a favor, but anyway this is a personal issue.

At a company level, yes I am aware of what Praful Patel did (Descent of AI is an eye opening book), but it's not like the company was all milk and honey before.

It averaged 100 crores in loses every year from 96-01 iirc. Vajpayee also wanted to privatise it but didn't have the numbers to do so and the plan was shelved. Quite frankly it was making revenues only because of monopoly traffic into the gulf. And yes I agree though they Patel gifting away landing rights like they belonged to him personally was unacceptable but facts are that in a few market AI would have collapsed anyway.

Finally yes, I still don't understand how forum patrons can't tell the difference between a limited stake sale and full blown privatisation.

Like how is this "selling the family silver?" It's not even mortgaging the family silver because the GoI will retain full control post sale also.

[whitewing]

Originally Posted by V.Narayan

Personally speaking I have been a customer of LIC since the 1980s and thus far have enjoyed quite decent service even though my original LIC agent passed away many years ago.

I have been a victim of being "ordered" by my elders to purchase some policies, soon after I started earning.
Fortuitously, the policies my dad's friend made me buy, have turned out to be very good ones. Perhaps, LIC actuaries were more generous during early 2000s? I see these policies discontinued or altered with very diluted returns. I can see why people of my dad's generation saw in LIC a good investment option.
I have not invested further in insurance as an investment and have kept risk cover separate from investments.

LIC has been able to seamlessly digitize, so much so that it has been more than a decade since I visited an LIC office. That in itself is good customer service.

Originally Posted by srini1785

......
While GOI is very right in its disinvestment of Air india and other loss making PSU's , this news would be greeted cautiously by the general public.

Surely, this will be a damper for new policy purchases; existing policy holders need not be too worried. However, finding an investor may not bee too easy, given that the Govt. still would retain majority control and margins may not be that great.
Read an excellent summary in https://finshots.in/archive/how-to-ipo-lic/

Quoting from above article

Every year, LIC generates a profit and does a little redistribution exercise. It ploughs back roughly 95% of the surplus back to policyholders and the remaining 5% to the government. This is great for LIC customers. They get the expected payout from their insurance plan and a lion’s share of the company’s profit pool. However private investors won’t be enthused with this scheme all that much. Imagine owning a part of LIC and being entitled to only 5% of the total surplus. That doesn’t bode well for you. So you need to switch it up.

Even after the 10% disinvestment, the government will still own 90% of the company. So technically, LIC will continue to be a government-owned entity. Meaning it might continue to champion the cause of the people — in the name of national interest of course. Maybe LIC will continue to bail out companies. Maybe it will continue making investments that aren’t necessarily prudent. Maybe the government will still wield considerable influence and prioritize its own interest, which by the way doesn’t always align with the interests of other shareholders. So despite being the biggest, baddest insurance company in India, the company still has a few problems.

[Sebring]

LIC has been that rare Govt Company, that was diligent and had wonderful schemes. They were always prompt, and I will definitely invest in them. Wonder who is the 'private suitor'!

[DigitalOne]

Originally Posted by whitewing

Fortuitously, the policies my dad's friend made me buy, have turned out to be very good ones. Perhaps, LIC actuaries were more generous during early 2000s? I see these policies discontinued or altered with very diluted returns.

Can you please share how much IRR you have got in the LIC endowment policies that you have?

[Lalvaz]

Originally Posted by Stribog

How many of those educational institutions are anywhere in the global rankings?

In QS rankings IIT Bom is 172! IIM A is #60. How many patents are filed by these institutions? How many scientific advances, measurable do they make?

Your definition of "world class" seems nebulous. Yes they are super hard to get in but that's a function of competition, but by yardsticks they are measured in globally for unis, none of these figure anywhere in the top 25. And let's not say these are west skewed, look at the sheer number of unis from China for instance.

172 in a global ranking is not bad, secondly the same study you quote has mentioned that IIT Bombay has a very good research output. QS has also rated IIT Bombay at #44 worldwide in the subjects of Engineering & Technology.
https://www.topuniversities.com/univ...gy-bombay-iitb

Originally Posted by Stribog

On the "good PSU's", a stake sale where the govt retains a controlling interest to raise money is not a wrong thing at all.

I fail to see why you and the forum in this thread think it's tantamount to privatisation when it's a limited stake dilution.

Please re-read my post again to understand the point I'm trying to make wherein the majority shareholder dilutes his holdings in the firm and yet continues to misuse his majority shareholding in the firm to bail out his loss making investments elsewhere. This is a clear case of cheating of the minority shareholders.

[Stribog]

Originally Posted by Lalvaz

172 in a global ranking is not bad, secondly the same study you quote has mentioned that IIT Bombay has a very good research output. QS has also rated IIT Bombay at #44 worldwide in the subjects of Engineering & Technology.
https://www.topuniversities.com/univ...gy-bombay-iitb



Please re-read my post again to understand the point I'm trying to make wherein the majority shareholder dilutes his holdings in the firm and yet continues to misuse his majority shareholding in the firm to bail out his loss making investments elsewhere. This is a clear case of cheating of the minority shareholders.

Quite frankly if you consider 172 as a "world class" uni, I think there is so much disagreement here that we can't meet midway.

And please can you explain just who these minority shareholders are in LIC?